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Chapter 22 Crash and Depression

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1 Chapter 22 Crash and Depression
Photos by photographer Dorothea Lange

2 Herbert Hoover Herbert Hoover elected President in 1928:
“We are nearer to the final triumph over poverty than ever before in the history of any land” Economy, business and gov. all seemed strong, no limits were placed on borrowing

3 Causes of the Great Depression
1. Uneven Prosperity: Huge corporations dominated industry: 200 companies owned 49% of industry Majority of people (71%) earned less than $2500 a year, with no savings. Wealthy families (.1%) had over $100,000. 2. Credit: Huge debt in America, over 60% borrowing

4 3. Too Many Goods/ Too Little Demand
Warehouses full, but no market Farmers in trouble after WWI Workers: most still overworked and under paid

5 4. Playing the Stock Market
Speculation: gambling on a long shot Buying on Margin

6 Stock/Stock Market What is stock? Who is a stockholder?
What does a stockbroker do? How does the value of stock increase? How does the value of stock decrease? Who buys your stock from you?

7 Why do Companies Sell Stock?
Why do people Buy Stock? If a company does well, stock holders benefit Investing/Dividend Checks Can be a quick and easy way to make money Gambling/ Buy Low, Sell High Why do Companies Sell Stock? To enable their company to expand Quick and easy way to get money to Hire more people Increase # of stores Improve technology

8 Investing: Gambling/ Playing the Stock Market:
No Commitment to the Company “Buy Low, Sell High” Health South stock crashes! Still a good company Could buy for 3 cents! Buy 10, 000 shares, you pay _________ Sell your stock at $6.00 a share, you make _____________! Companies cannot count on your money Investing: Stockholders are committing to the company for the “Long Haul” Dividend checks each quarter if company makes profit McDonald’s makes $10,000 in profits one quarter, you own 1% of the stock in that company, you make _______________. Reinvest or keep? Companies can count on your money

9 What is Buying on Margin?
What is a loan shark? How can a loan shark affect the Stock Market?

10 What is a Fixed Interest Rate?
Major Issues today: Home Mortgage What is a Mortgage? Buying a Home: What is a Fixed Interest Rate? What is an ARM (Adjustable Rate Mortgage)? 30 year Mortgage: 8.0% 7 Year ARM: 5.0 % 5 Year ARM: 4.5% 3 Year ARM: 4.0% What are the advantages to A Fixed Rate? What are the disadvantages to A Fixed Rate? What are the advantages to an ARM? What are the disadvantages to an ARM?

11 TIMELINE September 1929: Professional investors felt the market was in danger No new customers were investing Many began to sell off their stocks October 24, 1929:Major Selling A group of bankers pooled money and tried to slow the rush by investing Stabilized a bit, but on Monday, falling again October 29, 1929: BLACK TUESDAY STOCK MARKET CRASHED

12 Black Tuesday!! The Stock Market Crash triggered the Great Depression
was not the cause! 16.4 million shares sold Over 30 billion in value lost Initially only affected those who had invested in the market

13 By mid-November, investors had lost about $30 billion

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15 Workers are affected As income and profits fell, factories began to close Workers lost jobs-most had no savings and now no income, more factories closed, more Americans out of work…began a downward cycle

16 Textiles, Oil, Steel, Rubber Industry slowed which caused
Auto Sales Decline= Less demand for: Textiles, Oil, Steel, Rubber Industry slowed which caused Lower Wages and Unemployment Which helped contribute further to

17 BANKS People began to try to withdraw savings from banks, but found that their savings accounts had been vanished Bank run 1929, Los Angeles

18 Banks Banks had lent money to speculators
Banks had invested depositors’ money in the stock market hoping for higher profits People rushed to get money, many banks closed Over 5,500 banks closed Over 9 million savings accounts vanished

19 MISTAKES BY GOV. Hawley-Smoot Tariff: intended to protect American Industry Raised Tariffs by as much as 70% Shut down international trade Federal Reserve: had cut interest rates in 1920s to encourage spending This encouraged Risky Spending

20 DEPRESSION AFFECTS THE WORLD
US investments withdrawn from postwar Europe Unemployment rose Governments in danger of revolution

21 Social Effects of the Depression
Hardest hit were those at the bottom of the economic ladder Last to be hired and 1st to be fired Hoovervilles and Hoover Blankets Nicknames to mock the president

22 HOBOS: Homeless, unemployed Americans searching for work
Riding the rails Mainly boys and young men

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24 THE DUST BOWL Because of over cultivation of fields, Midwestern lands had no trees to protect land 1932 drought, land dried up and had nothing to help hold the topsoil Winds created dust storms

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26 Over 1,000,000 people left Midwest and moved to California

27 Cities and Rural Areas CITIES: people begged, went to soup kitchens, worked at any job they could find RURAL AREAS: People grew food if possible, foraged in woods, tried to live off the land

28 Stress on Families Families had to live together in small apartments, 2-3 families per home Divorce rates: dropped b/c could not afford lawyers Men felt like failures b/c they could not support family Women often forced from jobs: more imp. For men to work

29 Children in the Great Depression
Schools closed Children lost education Families couldn’t support their children Sent to orphanages

30 Discrimination in the Depression
Whites began to take minorities jobs Many relief programs would not help minorities Some whites declared that blacks should not have jobs if whites were out of work Blacks were denied civil rights, education, voting, health care…

31 Lynching increased Hispanics and Asians were deported

32 March 31, 1931: Scotsboro, AL Scotsboro Boys: 9 black men accused of assaulting 2 white men and raping two white women

33 No evidence All 9 convicted and sentenced to death (youngest was 13) Appeals lasted until 1950 1976 Governor Wallace pardoned the boys

34 Pulling together Majority of Americans pulled together to help out
Food Handouts Work for room and board Auctioneers left with no profits as neighbors kept bids low

35 Escaping the Depression: Hollywood
60-90 million Americans went to the movies to see beauty and glamour: to forget their troubles

36 Escaping The Depression: Radio
Radio comedy sketches and soap operas also provided escapes:

37 President Hoover Responds
Told people to have faith, that conditions would improve soon Met with heads of banks, railroads, and other big business leaders Convinced them to maintain wages and keep workers at jobs By 1931, businesses could not do this; began to cut pay

38 Hoover insisted that voluntary action was best
Felt that direct federal relief would destroy people’s self respect

39 Did begin public works programs: public buildings, roads, parks, dams to create jobs
too little to impact the depression

40 Only way to create enough jobs to make an impact was massive gov
Only way to create enough jobs to make an impact was massive gov. spending Hoover refused to do this Had to have money for this to work Where to get the money? Raise taxes Government deficit

41 Reconstruction Finance Corporation
1932: Hoover wanted banks to loan money to corporations to expand job hiring Extend loans and credit to banks, railroads, and other large corp. Ordinary people believed gov. was helping rich

42 Emergency Relief and Construction Act
Hoover finally allowed massive Gov’t spending 1.5 million was given for public works 300 million to states Not big enough a program to help Economic collapse continued

43 Americans Respond to the Depression
Hunger Marches Against large corporations Against the gov’t “Feed the Hungry, Tax the Rich”

44 Farmers Revolt Began destroying crops to try to raise prices and blocked roads to prevent deliveries

45 Bonus Army : Summer 1932 Most went home 15,000 WWI Vets March on DC
Were promised bonuses after WWI To be paid in 1945 House: Yes Senate : No Most went home Many stayed in abandoned buildings Army was called in to remove them ARMY VS. BONUS ARMY Nation Horrified Hoover accepts responsibility Hurts him in 1932 election

46 Election of 1932 Hoover FDR FDR won by over 7,000,000 votes
Federal Gov’t should not step in and try to fix people’s problems FDR Large scale problems require the help of the gov’t FDR won by over 7,000,000 votes Many voted AGAINST Hoover

47 “The only thing we have to Fear, is Fear Itself”

48 Chapter 23: The New Deal FDR’s program of (attempted)economic recovery Willing to try anything to restore hope of Americans

49 Sought advice from experts in business, agriculture, government, law, social work…
Deliberately chose people who had different viewpoints than him

50 The First New Deal The First One Hundred Days:
FDR sent one bill after another to Congress Btwn March 9 and June 16, Congress passed 15 major acts for the New Deal

51 Banks and the Stock Market:
FDR sworn in on March 3, 1933 March 5 declares “Bank Holiday” Temporarily closes all banks to inspect their “health”

52 Emergency Banking Relief Act-
inspect banks; those that were “ok” would be issued a Treasury Department License 2/3 of banks re-opened March 15

53 Fireside Chats A series of 30 radio addresses given between 1933 and 1944 To give people confidence in the gov’t

54 FDIC- Federal Deposit Insurance Corporation
government insurance on bank deposits up to $5000.

55 S.E.C. Securities and Exchange Commission:
gov’t agency to regulate the stock market and prevent fraud Companies had to provide truthful and accurate information to investors

56 Alphabet “soup” Agencies: For Relief, Recovery and Reform

57 A. A. A. Agricultural Adjustment Act- May 1933
To raise prices by lowering output; gov’t would pay farmers not to grow certain crops Problem: by May, most farmers had already planted and began raising livestock Farmers had to plow of their crops and 6 million piglets Was successful at raising many farm incomes, but raised prices when many consumers could not afford to pay extra

58 C. C. C. Civilian Conservation Corps:
Most highly praised agency, and Roosevelt’s favorite 18-25 year old men working to protect and preserve nature Planting trees, fighting fires, building dams, parks, campgrounds, trails

59 Made around $30 a month, and lived in camps near where they worked.

60 T.V.A. Tennessee Valley Authority:
Dam building project to control floods, conserve forestland, and bring electricity to one of the most depressed areas in America

61 Constructed 20 dams and employed as many as 40,000 people
Problem: many people were forced to leave homes for new gov’t lands Pollution

62 H.O.L.C Home Owner’s Loan Corporation
Bought many mortgages of those who could not make payments Restructured and refinanced to make payments more affordable Problems: only offered to those still employed, and would foreclose just as a bank would if payments not met

63 F.C.A. Farm Credit Administration: Helped farmers refinance mortgages

64 P.W.A. and C.W.A. Public Works Administration and Civil Works Administration Both designed to put average Americans to work building and improving highways, dams, sewers, waterworks and schools

65 PWA- awarded contracts to companies
CWA- directly hired individuals Built 1,000 airports, 500,000 miles of roads, and 40,000 school buildings Employed over 4 million people Problems: FDR worried about the ONE billion dollar cost and cut the program in 1934.

66 Legacy of 1st New Deal: restored hope and gave Americans confidence in the gov’t.

67 The Second New Deal: 1935: FDR launched a series of new programs to speed up the economic recovery of the nation 1st New Deal had provided jobs, but had not stimulated the economy as much as FDR hoped.

68 W.P.A. Works Progress Administration:
Americans built highways, roads, streets, public buildings, parks, bridges, and airports Controversial Part: Federal Theatre Project financed artists and playwrights

69 N.L.R.B. National Labor Relations Board/ Wagner Act:
Gave unions the right to organize w/o interference from companies Problem: gave unions too much power Supreme Court struck it down

70 S.S.A. Social Security Act: 1935:
viewed as an insurance bill, paid jointly by employee and employer Monthly retirement benefit (age 65) Unemployment insurance Disability Insurance Welfare Problem: took money out of paychecks to finance this

71 F.L.S.A Fair Labor Standards Act:1938: more protection for workers
Established minimum wage (.25/hr) 40 hour work week Banned child labor Problems: Companies cut pay, cut hours and cut child labor

72 Challenges/Limits of the New Deal Programs:
New Deal agencies did not extend to minorities and women: Women paid less for the same work Most jobs went to the “head” of the family African Americans segregated further Not offered skilled, professional jobs Lower pay than whites

73 Roosevelt did not support anti-lynching bills
Feared losing southern support Did appoint more African Americans to gov’t positions than any other president

74 The New Deal Does Too Much:
Republicans opposed FDR’s programs Overtaxes the rich Is Socialistic Social Security penalizes successful people Puts limits on individual freedoms American Liberty League: 1934: to organize opposition to the New Deal

75 The New Deal Does Not Do Enough:
Progressives and Socialists wanted more Should create a new economic system Gov’t should take over factories and farms Gov’t should redistribute wealth

76 Court Packing Gets Criticism:
Supreme Court and FDR had butted heads over many work programs: courts had ruled many unconstitutional 1937: FDR proposed a major court reform bill No specific # had been set for judges;9 had been tradition

77 FDR wanted to add 6 more judges; said it was to lighten the burden on the other 9; really wanted judges who would support him Seemed to many that FDR was acting like a dictator; compromising the 3 branches Senate quietly killed the bill

78 Union Activity Increases: 1.Wagner Act- gave unions federal protection
2. AFL and CIO increase in membership 3. Sit-down strikes: subs could not be brought in, companies were forced to deal with unionists. Many sit-downs turned violent Sit-down strikes were outlawed in 1939

79 Recession of 1937: Social Security Tax came directly out of paychecks
FDR cut back on many job programs because of rising national debt

80 Legacy of the New Deal: New Deal did not end suffering, but it changed America forever. Voters began to expect Presidents to solve their problems Accept more gov’t intervention in their lives Laborers demand more changes in the workplace Many new deal programs still around today: TVA, FDIC, Securities and Exchange Commission, Social Security

81 New Deal’s Greatest Achievement:
brought hope to America New Deal’s Greatest Failure: was to be a temporary solution to the Depression


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